Weekly Market Analysis – Forex, Commodities, Stocks

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What Is the Best Method of Analysis for Forex Trading?

Forex analysis is used by retail forex day traders to determine to buy or sell decisions on currency pairs. It can be technical in nature, using resources such as charting tools. It can also be fundamental in nature, using economic indicators and/or news-based events.

Types of Forex Market Analysis

Analysis can seem like an ambiguous concept to a new forex trader. But it actually falls into three basic types.

Fundamental Analysis

Fundamental analysis is often used to analyze changes in the forex market by monitoring figures, such as interest rates, unemployment rates, gross domestic product (GDP), and other types of economic data that come out of countries. For example, a trader conducting a fundamental analysis of the EUR/USD currency pair would find information on the interest rates in the Eurozone more useful than those in the U.S. Those traders would also want to be on top of any significant news releases coming out of each Eurozone country to gauge the relation to the health of their economies.

Technical Analysis

The technical analysis comes in the form of both manual and automated systems. A manual system typically means a trader is analyzing technical indicators and interpreting that data into a buy or sell decision. An automated trading analysis means that the trader is “teaching” the software to look for certain signals and interpret them into executing buy or sell decisions. Where automated analysis could have an advantage over its manual counterpart is that it is intended to take the behavioral economics out of trading decisions. Forex systems use past price movements to determine where a given currency may be headed.

Weekend Analysis

There are two basic reasons for doing a weekend analysis. The first reason is that you want to establish a “big picture” view of a particular market in which you are interested. Since the markets are closed and not in dynamic flux over the weekend, you don’t need to react to situations as they are unfolding, but can survey the landscape, so to speak.

Secondly, the weekend analysis will help you to set up your trading plans for the coming week, and establish the necessary mindset. A weekend analysis is akin to an architect preparing a blueprint to construct a building to ensure a smoother execution. Tempted to trade without a plan? Bad idea: Shooting from the hip can leave a hole in your pocket.

Applying Forex Market Analysis

It’s important to think critically about the tenets of forex market analysis. Here is a four-step outline.

1. Understand the Drivers

The art of successful trading is partly due to an understanding of the current relationships between markets and the reasons that these relationships exist. It is important to get a sense of causation, remembering that these relationships can and do change over time.

For example, a stock market recovery could be explained by investors who are anticipating an economic recovery. These investors believe that companies will have improved earnings and, therefore, greater valuations in the future—and so it is a good time to buy. However, speculation, based on a flood of liquidity, could be fueling momentum and good old greed is pushing prices higher until larger players are on board so that the selling can begin.

Therefore the first questions to ask are: Why are these things happening? What are the drivers behind the market actions?

2. Chart the Indexes

It is helpful for a trader to chart the important indexes for each market for a longer time frame. This exercise can help a trader to determine relationships between markets and whether a movement in one market is inverse or in concert with the other.

For example, in 2009, gold was being driven to record highs. Was this move in response to the perception that paper money was decreasing in value so rapidly that there was a need to return to the hard metal or was this the result of cheap dollars fueling a commodities boom? The answer is that it could have been both, or as we discussed above, market movements driven by speculation.

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3. Look for a Consensus in Other Markets

We can gain a perspective of whether or not the markets are reaching a turning point consensus by charting other instruments on the same weekly or monthly basis. From there, we can take advantage of the consensus to enter a trade in an instrument that will be affected by the turn. For example, if the USD/JPY currency pair indicates an oversold position and that the Bank of Japan (BOJ) could intervene to weaken the yen, Japanese exports could be affected. However, a Japanese recovery is likely to be impaired without any weakening of the yen.

4. Time the Trades

There is a much higher chance of a successful trade if one can find turning points on the longer timeframes, then switch down to a shorter time period to fine-tune an entry. The first trade can be at the exact Fibonacci level or double bottom as indicated on the longer-term chart, and if this fails then a second opportunity will often occur on a pullback or test of the support level.

Patience, discipline, and preparation will set you apart from traders who simply trade on the fly without any preparation or analysis of multiple forex indicators.

Acquiring Forex Trading Systems and Strategies

A day trader’s currency trading system may be manually applied, or the trader may make use of automated forex trading strategies that incorporate technical and fundamental analysis. These are available for free, for a fee or can be developed by more tech-savvy traders.

Both automated technical analysis and manual trading strategies are available for purchase through the internet. However, it is important to note that there is no such thing as the “holy grail” of trading systems in terms of success. If the system was a fail-proof money maker, then the seller would not want to share it. This is evidenced in how big financial firms keep their “black box” trading programs under lock and key.

The Bottom Line

There is no “best” method of analysis for forex trading between technical and fundamental analysis. The most viable option for traders is dependent on their time frame and access to information. For a short-term trader with only delayed information to economic data, but real-time access to quotes, technical analysis may be the preferred method. Alternatively, traders that have access to up-to-the-minute news reports and economic data may prefer fundamental analysis. In either case, it does not hurt to conduct a weekend analysis when the markets are not in a constant state of fluctuation.

Stock market Analysis

Benefits of the Stock market

Stock market is basically a network of economic transactions that deals with the shares and obligations. There are three global stock markets: in Tokyo, New York, and London. Stock market traders comprise a variety of participants: institutional investors (banks and insurance organizations); retail investors and even publicly traded corporations. The stock market represents an essential source of money raise for the companies and allows them to be publicly traded.

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Forex and Stock Market

Having rather a lot in common these two markets are often confused. To make it clearer, some basic differences are described below.

First of all, the volume of involved money in stock market is a lot bigger, therefore an overall capital for trader to start buying shares should be in the range of $10,000-100.000.

Unlike forex market, stock market is only open 5 days a week from 9:30 AM to 4:00 PM EST.

Moreover, trading on the stock market is much slower and steadier.

Stock Market Trading

For successful trading on the stock market it is important to remember the following.

Because of the great amount of shares of various companies that the stock market is run with, it is almost impossible to foretell the move of shares of the specific company. Therefore, preparation is crucial. Keeping an eye on the news will help perform the better stock market analysis and reduce the risk of investing. It is wiser to watch the local news for the company of interest, as it can make the stock market forecast more achievable. Examining the stock market technical analysis in addition to the stock market news will assist in developing a good strategy.

Nevertheless, in spite of the safety and tranquility of the stock market, a 100% winning cannot be secured; moreover, there is also a chance of losing all your funds.

Risk Disclosure: GuruTrade assumes no liability for loss or damage as a result of reliance on the information contained within this website including data, quotes, charts and forex signals. Operations in the international foreign exchange market contain high levels of risk. Forex trading may not be suitable for all investors. speculating only the money you can afford to lose. GuruTrade remind you that the data contained in this website is not necessarily real-time and may not be accurate. All stock prices, indexes, futures are indicative and not appropriate for trading. Thus, GuruTrade assumes no responsibility for any trading losses you might incur as a result of using this data. Version of the document in English is a defining and shall prevail in the event that there are discrepancies between the English and Russian languages. Seeking stocks, quotes, charts and forex? Take a look at the portal GuruTrade.com – the best directory of brokers and modern economic calendar for your service!

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Trading 20 Day Exponential Moving Average

Technical Analysis Of Stocks And Commodities Using Basic Indicators

Last weekend I was asked by numerous traders who practice technical analysis of stocks and commodities, what indicator I preferred to use the most.

The answer was the Exponential Moving Average or (EMA) for short. I demonstrated yesterday how to use the EMA to measure pullbacks away from the main trend.

The method is rather simple but works remarkably well for finding stocks and other markets that are trending and more importantly measuring a pullback away from the trend.

In a nutshell we found a stock that was trending strongly above the 20 Day EMA and waited for the stock to trade completely below the 20 day EMA.

We waited a few days for the stock to come back completely above the moving average, and I don’t recommend you wait more than 5 days for this event to occur.

In other words once the stock drops completely below the 20 day EMA, you should wait no more than 5 trading days for the stock to rally above the 20 day EMA.

You can see the entire process that I just described in this chart.

The market first rallied above the 20 day EMA then traded below the 20 day EMA and finally within 2 days traded completely above the 20 day EMA.

You Can See The Entire Progression In This Example

Creating A Complete Trading Method Using 20 Day Exponential Moving Average

Today I’m going to show you the correct way to enter this strategy and where to place your stop loss order.

I highly suggest you pick stocks, futures or forex markets that are going through volatile periods.

Most swing trading methods require strong volatility and this method is no exception.

You can see in this example how Facebook stock began trading well above the 20 day EMA before moving completely below the average.

The stock stayed below the EMA for less than 2 trading sessions.

Remember you never want the stock or other market you are trading to stay below the average for more than 5 trading days.

Notice How Facebook Trades Completely Below The EMA Less Than 2 Trading Sessions

Once the market trades back above the EMA we want of find a strategic entry point so that we don’t get stopped out randomly due to market noise.

I prefer to place my entry order immediately above the first bar that trades completely back above the EMA.

I place a buy stop order $.025 cents above the high that was achieved the first day the stock trades completely above the EMA.

Although I’m using stocks in this example, the method applies to commodities, futures and currencies as well.

The Order Is Cancelled And The Trade Is Nullified If Stop Is Not Triggered First Day

You want to make sure to monitor the market and make sure you cancel your entry stop order if the trade doesn’t fill the first day after you place your stop order.

You want to see strong momentum coming back into the market after the cross over above the EMA occurred.

If the market doesn’t move straight up the odds are the set up is weak and you may want to look at other stocks or markets.

Where To Place Your Protective Stop Loss Order

I want to place my stop loss order at a strategic level so that I don’t get stopped out prematurely due to volatility and market noise.

One of the biggest reasons many trades don’t work out is because the stop loss level is not placed at a strategic level.

There’s nothing more frustrating that watching your favorite market or stock get stopped out only to see a strong continuation in your direction.

Make sure you place your stop loss order at the moving average price level immediately between the first bar completely below the EMA and the first bar immediately above the EMA.

This may sound a bit confusing so I provided an example for you to see exactly where the stop loss level would be.

Place The Stop Loss Level Between The First Bar Below And The First Bar Above The EMA

Example From The Short Side

Just in case the example above was a bit confusing I’m going to confuse you even more by showing you the entire sequence from the short side.

I’m just kidding about the confusing you more part. I really think it’s a good idea to see how the set up looks visually from the long side as well as the short side.

Notice in this particular example the stock only stayed above the moving average for 3 trading days.

I Would Avoid The Trade If The Stock Remained Above The Moving Average For Over 5 Days

Remember the stop loss placement goes at the moving average level between the first bar outside of the moving average and the first bar inside the moving average.

You can see both bars identified in this graph.

You Can Clearly See The First Bar On Each Side Of The EMA

Now that you know how to identify the set up and the first bar inside and outside of the moving average, you should place your stop loss at the moving average level of the area immediately between the two bars.

You can get a good idea from this graph exactly where the stop loss level is placed.

This is a buy stop not a stop loss because we are selling short.

Notice How I place The Protective Stop Immediately Between The Two Price Levels

Tomorrow I will conclude this three part series on building a complete strategy using the 20 day EMA.

We are going to go over profit targets and I will show you the best way to calculate your profit target levels for this strategy.

Wishing you the best

By Roger Scott
Senior Trainer
Market Geeks

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